WASHINGTON - More than 9,500 students from Minnesota's colleges and universities have defaulted on their federal student loans over the past three years, new data from the U.S. Department of Education shows.

State officials worry that roughly one in seven students who borrowed federally backed money to attend public two-year colleges are behind on loan payments, and the overall numbers at some individual schools are also a concern. At the largest Minnesota-based for-profit school, Capella University, nearly 1,000 student debtors -- almost one in 10 -- are in arrears.

Both Capella and another for-profit school, Rasmussen College, have more students in default than all of the private schools combined.

Student debt, which now exceeds credit card debt nationally, has become a flashpoint of financial frustration as overextended students struggle to pay the bill for their education. The inability of many college graduates to make enough to pay back loans remains a source of controversy between regulators and educators, especially in the for-profit college sector.

Because the federal government guarantees most student loans, the government increasingly finds itself forced into the role of debt collector.

Under new federal guidelines, schools that average 30 percent default rates for three years or hit 40 percent for one year face sanctions that could eventually cost them their eligibility to receive federal student loans.

"Default rates are one thing we look at in deciding how often to audit schools," said Tricia Grimes, a policy analyst with the Minnesota Office of Higher Education, which regulates the state's colleges.

The actual number of defaulting students is important, Grimes said, because federal revenue is affected by every student loan dollar the government does not recover.

Rates alone can be misleading. The school with the state's worst student loan default rate, Cosmetology Careers Unlimited of Hibbing (31.2 percent) has only five students in default.

"Because we're such a small school we can have dramatic fluctuations in the rate," said the school's owner, Rich Shaffer. "I looked at Rasmussen. Their default rate is only 14 percent, but that means 698 people."

Minnesota's schools have an overall default rate of 9 percent, less than the national average of 13.4 percent. Minnesota-based for-profit schools have an overall default rate of 10.1 percent, less than half of the 22.7 percent national average. Public four-year schools in Minnesota have an overall default rate of 4.4 percent, while the national average is 7.9 percent. And private, non-profit schools have a default rate of 4 percent, compared with a national average of 7.5 percent.

Capella University spokesman Mike Buttry said comparing Capella's 963 defaulting students to the 649 defaulting students at all of Minnesota's private four-year colleges was "not apples to apples," because Capella's student body is more than 36,000. Buttry also said a comparison to the University of Minnesota, where 213 defaulting students produced a 2.5 percent default rate in a student body of 65,000 was not right either.

Capella, a publicly traded company, is an online school with a "non-traditional," national student body, Buttry explained. The students in default "are not all Minnesota students. Our rate of default is well below average for for-profit schools."

For example, the University of Phoenix, the nation's largest online school, has 49,592 students in default and a default rate of 26.4 percent.

Walden University, the second largest Minnesota-based for-profit, had a default rate of just 4.2 percent, competitive with any sector. The reasons why are threefold, said the school's president, Cynthia G. Baum. "We're primarily working with adults who come for career advancement. We set expectations and ensure a good fit between interest and skills. And we're very committed to outcomes employers are looking for."

The overall default rate of 14.7 percent at Minnesota's public two-year schools is below the national average of 18.3 percent. But a number of community and technical colleges have default rates in the high teens to mid-twenties. At two schools, Hibbing Community College and Mesabi Range Community and Technical College, one in four student debtors has defaulted.

One poorly performing school, Rainy River Community College (23.8 percent default rate), has voluntarily entered into a default reduction plan with Wisconsin-based Great Lakes Educational Loan Services, Inc., said Chris Halling, director of student financial aid at Minnesota State Colleges and Universities (MNSCU), which oversees two-year public schools.

"They maintain good addresses and contact students earlier and more often," Halling said. "Rather than wait until they are 90 days overdue on loan payments, they contact students during the grace period. They tell them about forebearance and other options."

Tools for students

Tools are entering the marketplace to help students assess how much debt they are taking on. The Debt-O-Meter, for example, is designed by St. Paul-based Northstar Education Services and currently installed in pilot programs at Inver Hills Community College and Minneapolis West Community and Technical College.

The idea is to let entering students weigh the costs of different schools and courses of study against the earning potential of certain jobs.

A screen where students enter careers and loan amounts compares income and repayments schedules and pushes a needle on a dashboard that measures risk of default in green, yellow and red categories labeled, respectively, "manageable, challenging and complex."

That's the "front-end piece," Halling said.

The "back-end piece" is a second computer-assisted pilot program being tested at Hibbing, Metropolitan State University and Minneapolis Community and Technology College . It lacks a pithy name, but is a reality check for graduating students who voluntarily release personal financial details to Northstar in exchange for a menu of loan repayment options.

"A lot of students say, 'I had no idea I owed that much money,'" said Northstar vice president Brian Parker.